is under the same liability to third parties in respect of the debts and obligations of the firm incurred before the partnership contract has been rescinded as he would have been under had the contract been valid and unimpeachable, he is entitled, on the rescission of the contract, to be indemnified against these liabilities. The extent of the indemnity is now defined by sec. 41 of the Partnership Act, 1890. Under that section he is, without prejudice to any other right, entitled

(a) To a lien on, or right of retention of, the surplus of the partnership assets, after satisfying the partnership liabilities for any sum of money paid by him for the purchase of the share in the partnership, and for any capital contributed by him; and

(b) To stand in the place of the creditors of the firm for any payments made by him in respect of the partnership liabilities; and

(c) To be indemnified by the person guilty of the fraud or making the representation against all the debts and liabilities of the firm.

The cases decided before the Act show that the person entitled to rescind had further rights, which appear to be preserved by the Act; for instance, in the case of fraud (Derry v. Peek, 1889, L. R. 14 App. Cas. 337) to recover damages from the persons guilty of the fraud (see Newbigging v. Adam, 1886, 34 Ch. D. p. 589); and in all cases within the section to a lien not only for the principal moneys mentioned in clause (a) of sec. 41, but also for interest thereon, and for his costs of action (Mycock v. Beatson, 1879, 13 Ch. D. 384); and in addition to his lien, to an order making the persons who received such moneys personally liable to repay them, with interest (Adam v. Newbigging, 1888, 13 App. Cas. 308; Rawlins v. Wickham, 1858, 1 Gif. 355; 65 E. R. 954; and 3 De G. & J. 304; 44 E. R. 1285). It appears also that he is entitled to interest on all payments made by him in respect of the partnership liabilities, and liable for interest on all profits which he has received (Rawlins v. Wickham, supra).

(3) Dissolution by an Arbitrator.-If partners, by their articles of partnership or otherwise, agree to refer all matters in difference to an arbitrator, and a dispute arises involving the question whether the partnership has been or ought to be dissolved, the arbitrator has power to dissolve the partnership (Vawdrey v. Simpson, [1896] 1 Ch. 166; Belfield v. Bourne, [1894] 1 Ch. 521). In such case the Court may, in its discretion, stay an action for dissolution, and send the question to arbitration (ibid.), and appoint a receiver pending the arbitration (Pini v. Roncoroni, [1892] 1 Ch. 633), or may refuse to stay the action (Barnes v. Youngs, [1898] 1 Ch. 414, a case of expulsion; Joplin v. Postlethwaite, 1889, 61 L. T. N. S. 629; Turnell v. Sanderson, 1891, 64 L. T. N. S. 654).

(4) Dissolution under the Companies Acts.-A partnership which consists of more than seven members may be wound up by order of the Court, under the Companies Acts, 1862 to 1890, as an unregistered company (see Act, 1862, s. 199): (1) Whenever it is dissolved or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs; (2) whenever it is unable to pay its debts; and (3) whenever the Court is of opinion that it is just and equitable that it should be wound up. For information as to this, the reader is referred to Buckley on The Companies Acts; Lindley on The Law of Companies; Palmer's Company Precedents, part ii.; and other writers on company law.

(5) Retirement.-In the absence of any special agreement, a partner has no right to retire from a firm without the consent of all the members

of the firm, except by dissolving the firm, when he is in a position to do so (as to this, see ante, p. 443).

(6) Expulsion.-No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners (Part. Act, 1890, s. 25, and ante, p. 434).

A partner who has retired or been expelled from a firm may, in the absence of any agreement to the contrary, set up and carry on a business in competition with, and in the immediate neighbourhood of, his former firm, and advertise such business and deal with the customers of his former firm; but if his former partners are entitled, by purchase from, or under an agreement with, him, to the goodwill of the partnership business, he may not represent himself as continuing or succeeding to that business, nor may he solicit the customers of the firm (Churton v. Douglas, 1859, John. 174; 70 E. R. 385; Labouchere v. Dawson, 1872, L. R. 13 Eq. 322; Dawson v. Beeson, 1882, 22 Ch. D. 504; Trego v. Hunt, [1896] A. C. 7; Jennings v. Jennings, [1898] 1 Ch. 378; article on GOODWILL; Lindley on Partnership, pp. 476 et seq.).

(7) Consequences of Dissolution.-The effect of a dissolution, whether general or partial, on the liability of a partner for the future (ante, p. 428) or past (ante, p. 430) acts of his copartners, the necessity for giving notice of dissolution (ante, p. 428), the extent to which a partner's authority to bind the firm continues (ante, p. 429), the continuance of the obligation to observe good faith (ante, p. 435), the proportions in which profit and loss (ante, p. 437) are to be shared and borne between them, their right to contribution and indemnity (ante, p. 439), and in some cases to compensation for services after dissolution (ante, p. 434), and the rules for ascertaining what is and what is not partnership property (ante, p. 435), have already been discussed, and must be borne in mind when settling the partnership accounts and finally winding up the affairs of the firm. The following topics remain for consideration

(a) Return of Premiums.-It frequently happens, when one person is admitted into partnership with another already established in business, that the incoming partner pays the other a sum of money, or premium, for his own private benefit.

If the new partner has been induced to enter into the partnership and pay the premium by a fraud or misrepresentation, he may rescind the contract and recover the whole premium (Part. Act, 1890, s. 41, and ante, p. 445), or abide by the contract and, in the case of fraud, claim compensation for the loss thereby occasioned. Even in the absence of fraud, the partner who paid the premium may in some cases claim a return of a portion of the premium when the partnership has been prematurely dissolved.

In the case of a partnership at will, the partners must be taken to have run the risk of the partnership being determined at any time (Tattersall v. Groote, 1800, 2 Bos. & Pul. 134), and, apart from fraud either in the formation or dissolution of the partnership (Featherstonhaugh v. Turner, 1858, 25 Beav. 382; Burdon v. Barkus, 1862, 4 De G., F. & J., at p. 52; 45 E. R. 1098), no part of the premium will be returned.

If a partnership for a fixed term is dissolved before the expiration of the term otherwise than by the death of a partner-a contingency which all persons entering into partnership know may determine it (Whincup v. Hughes, 1871, L. R. 6 C. P. 78; Ferns v. Carr, 1885, 28 Ch. D. 409; and see Mackenna v. Parkes, 1866, 36 L. J. Ch. N. S. 366) the Court, or, if the question of dissolution be submitted to

arbitration, the arbitrator (Belfield v. Bourne, [1894] 1 Ch. 521), may, except in certain cases hereafter mentioned, in its discretion order the repayment of the premium, or of such part thereof as it thinks just (Part. Act, 1890, s. 40; if the partnership be determined by the bankruptcy of a partner, see Hamil v. Stokes, 1817, Dan. 20; 18 R. R. 690; Akhurst v. Jackson, 1818, 1 Swans. 85; 36 E. R. 308; Freeland v. Stansfeld, 1854, 2 Sm. & G. 479; 65 E. R. 490).

In determining what is just, the Court is to take into consideration the terms of the partnership contract and the length of time the partnership has continued (s. 40; before this Act the Court exercised a wider discretion, see Lyon v. Tweddell, 1881, 17 Ch. D. 529). The rule generally adopted is to order the return of so much of the premium as bears the same proportion to the whole as the actual bears to the agreed duration of the partnership (Atwood v. Maude, 1868, L. R. 3 Ch. 369; Wilson v. Johnstone, 1873, L. R. 16 Eq. 606; Pease v. Hewitt, 1862, 31 Beav. 22; 54 E. R. 1045; Astle v. Wright, 1856, 23 Beav. 77; 53 E. R. 30; but compare Bullock v. Crockett, 1862, 3 Gif. 507; 66 E. R. 509; Freeland v. Stansfeld, and Hamil v. Stokes, ubi supra). The Court of Appeal will not, as a rule, interfere with the manner in which the Court of first instance has exercised this discretion (Lyon v. Tweddell, 1881, 17 Ch. D. 529).

The excepted cases in which the Court has no power to order any portion of the premium to be returned are (Part. Act, 1890, s. 40), first, where the dissolution is in the judgment of the Court wholly or chietly (see Astle v. Wright, 1856, 23 Beav. 77; 53 E. R. 30; Pease v. Hewitt, 1862, 31 Beav. 22; 54 E. R. 1045), due to the misconduct of the partner who paid the premium (Airey v. Borham, 1861, 29 Beav. 620; 54 E. R. 768; Atwood v. Maude, and Wilson v. Johnstone, ubi supra). If such partner has not paid the premium which he has agreed to pay, he will be ordered to pay it (Bluck v. Capstick, 1879, 12 Ch. D. 863). Secondly, where the partnership has been dissolved by an agreement containing no provision for the return of any part of the premium (Lee v. Page, 1861, 30 L. J. Ch. N. S. 857). If no definite agreement has been come to, and the partners have merely consented to dissolve, it is presumed that the question of the return of the premium will remain open (Bury v. Allen, 1844, 1 Col. C. C. 589; 63 E. R. 556; 66 R. R. 200; Astle v. Wright, 1856, 23 Beav. 77; 53 E. R. 30; Wilson v. Johnstone, 1873, L. R. 16 Eq. 606). The decision of the question whether any part of the premium is returnable or not should be obtained at the hearing of the action (Edmunds v. Robinson, 1885, 29 Ch. D. 170).

(b) Conduct of the Winding-Up.-The partners are the proper persons to get in the assets and wind up the affairs of the partnership, and their power to bind the firm continues for this purpose notwithstanding a dissolution (see Part. Act, 1890, s. 38, ante, p. 429). If, after a dissolution, they cannot agree as to the conduct of the winding-up, the Court will almost, as a matter of course, appoint a receiver, and, if necessary, a manager of the partnership business (Pini v. Roncoroni, [1892] 1 Ch. 633; Taylor v. Neate, 1888, 39 D. 538; Goodman v. Whitcomb, 1820, 1 Jac. & W. 589; 37 E. R. 492; 21 R. R. 244), and will restrain a partner by injunction from doing any act which will impede the winding-up of the concern, e.g. injuring the value of (Turner v. Major, 1862, 3 Gif. 442; 66 E. R. 483; Marshall v. Watson, 1858, 25 Beav. 501; 53 E. R. 728; see, too, Hermann Loog v. Bean, 1884, 26 Ch. D. 306) or misapplying the assets of the firm (Hood v. Aston, 1826, 1 Russ. 412; 38 E. R. 160; 25 R. R. 93; Garrett v. Moore, 1891, Seton, 5th ed., p. 591),

or withholding the partnership books (Greatrex v. Greatrex, 1847, 1 De G. & Sm. 692; 63 E. R. 1254; 75 R. R. 251).

Where a partnership has been dissolved by the death or bankruptcy of one of the partners, the surviving (Collins v. Young, 1853, 1 Macq. H. L. Cas. 385) or solvent (Ex parte Owen, 1884, 13 Q. B. D. 113) partners are entitled in a proper case to an injunction to restrain the executors or the trustee in bankruptcy (Allen v. Kilbre, 1819, 4 Madd. 464; 56 E. R. 776) from interfering with them. This right to wind up the affairs of the partnership is personal to the partners, and springs from the confidence originally placed in them by the deceased or bankrupt partner (Fraser v. Kershaw, 1856, 2 Kay & J. 496; 69 E. R. 878). Nevertheless, if special grounds be shown, the Court will, at the instance of the executors of a deceased or the trustee of a bankrupt partner, interfere by injunction (Hartz v. Schrader, 1803, 8 Ves. Jun. 317; 32 E. R. 376; 7 R. R. 55; Elliot v. Brown, 1819, 3 Swans. 489, note; 36 E. R. 948), or by the appointment of a receiver (Madgwick v. Wimble, 1843, 6 Beav. 495; 49 E. R. 917; 63 R. R. 155), to protect the partnership assets and insure the proper conduct of the winding-up (Part. Act, 1890, s. 39). The solvent partner may himself be appointed receiver and manager (Collins v. Barker, [1893] 1 Ch. 578; as to his remuneration, see Harris v. Sleep, [1897] 2 Ch. 80; Davy v. Scarth, [1906] 1 Ch. 55).

(c) Application of Partnership Property.-On a dissolution, every partner is entitled, as against the other partners, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets, after such payment, applied in payment of what may be due to the partners respectively, after deducting what may be due to the firm from them as partners (see West v. Skip, 1749, 1 Ves. 239; 27 E. R. 1006); but not in any other capacity (see Ryall v. Rowles, 1749, 1 Ves. 348; 27 E. R. 1074; Skip v. Harwood, 1747, 2 Swans. 586, note; 36 E. R. 739); and for that purpose any partner or his representatives may apply to the Court to wind up the business and affairs of the firm (Part. Act, 1890, s. 39).

This right is available against the executors of a deceased, or the trustee of a bankrupt, partner (Croft v. Pyke, 1733, 3 P. Wms. 180; 24 E. R. 1020) and the legatee (In re Ritson, R. v. R., [1899] 1 Ch. 128, affg. [1898] 1 Ch. 667) and the assignee of a partner's share (Cavander v. Bulteel, 1873, L. R. 9 Ch. 79), but not against a purchaser from a partner of specific property of the firm or an incumbrancer, even though merely equitable, on such property (Langmead's Trusts, 1855, 7 De G., M. & G. 353; 44 E. R. 138; In re Bourne, B. v. B., [1906] 2 Ch. 427, affg. [1906] 1 Ch. 113). It is in the nature of an equitable lien, and exists during the partnership, though it does not become active until a dissolution. It then only attaches to what was partnership property at the time of the dissolution (Payne v. Hornby, 1858, 25 Beav. 280; 53 E. R. 643; and see Nerot v. Burnand, 1847, 4 Russ. 247; 38 E. R. 798; 26 R. R. 12; 2 Bli. N. S. 215; 4 E. R. 1112; 28 R. R. 65; Ex parte Morley, 1873, L. R. 8 Ch. 1026). Unless specially retained (Holderness v. Shackels, 1828, 8 Barn. & Cress. 612; 32 R. R. 496) it is lost by the conversion of partnership property into the separate property of a partner (Lingen v. Simpson, 1824, 1 Sim. & St. 600; 57 E. R. 236; 24 R. R. 249; Langmead's Trusts, 1855, 7 De G., M. & G. 353; 44 E. R. 138; Holroyd v. Griffiths, 1856, 3 Drew. 428; 61 E. R. 966).

VOL. X.

29

(d) Right to a Sale.-On a dissolution, in the absence of special agreement, the right of each partner and of his representatives (Hale v. Hale, 1841, 4 Beav. 369; 49 E. R. 382; 55 R. R. 107; Wilson v. Greenwood, 1818, 1 Swans. 471; 36 E. R. 469; 18 R. R. 118), but not necessarily of everyone entitled to a share in the profits (Walker v. Hirsch, 1884, 27 Ch. D. 460), is to have the partnership property converted into money by a sale (Featherstonhaugh v. Fenwick, 1810, 17 Ves. Jun. 398; 34 E. R. 1187; 11 R. R. 77; Wilde v. Milne, 1859, 26 Beav. 504; 53 E. R. 993).

To avoid the loss consequent on a sale, several devices are had recourse to. The most usual is for the partners to agree that the share of an outgoing or deceased partner shall be taken at the value appearing on the last general account. If, in such a case, the accounts be regularly taken (Ex parte Barber, 1870, L. R. 5 Ch. 687; Coventry v. Barclay, 1864, 3 De G., J. & S. 320; 46 E. R. 659), or if, though the accounts be not taken in strict accordance with the articles, the agreement can be carried out in its spirit, the partners will be bound thereby (Hunter v. Dowling, [1893] 3 Ch. 212; Lawes v. Lawes, 1878, 9 Ch. D. 98; Simmons v. Leonard, 1844, 3 Hare, 581; 67 E. R. 512; 64 R. R. 427; Pettyt v. Janeson, 1819, 6 Madd. 146; 56 E. R. 1047; 22 R. R. 252; and where the agreement was for a valuation, see Dinham v. Bradford, 1870, L. R. 5 Ch. 519; cp. Collins v. Collins, 1858, 26 Beav. 306; 53 E. R. 916; Vickers v. Vickers, 1867, L. R. 4 Eq. 529).

But whatever agreement may be entered into to avoid a sale, if it cannot be carried out, or if it does not extend to the event which in fact arises, the Court will order a sale (Cook v. Collingridge, 1822, Jac. 607; 37 E. R. 979; 23 R. R. 155; Taylor v. Neate, 1888, 39 Ch. D. 538; Downs v. Collins, 1848, 6 Hare, 418; 67 E. R. 1228; 77 R. R. 171; Kershaw v. Matthews, 1826, 2 Russ. 62; 38 E. R. 259; 26 R. R. 13), though in one case it claimed a discretion in the matter, and refused to do so (Syers v. Syers, 1876, 1 App. Cas. 174).

The goodwill of the partnership business, in the absence of an agreement to the contrary, forms part of the assets of the firm, and, if saleable, any partner has the right to insist upon its sale (Hill v. Fearis, [1905] 1 Ch. 466; Pawsey v. Armstrong, 1881, 18 Ch. D. 698; Bradbury v. Dickens, 1859, 27 Beav. 53; 54 E. R. 21; see as to goodwill of commission agent, Steuart v. Gladstone, 1879, 10 Ch. D. 626; of tobacco broker, Davies v. Hodgson, 1858, 25 Beav. 177; 53 E. R. 604; of solicitor, Austen v. Boys, 1858, 2 De G. & J. 626; Arundell v. Bell, 1883, 52 L. J. Ch. 537; Burchell v. Wilde, [1900] 1 Ch. 551; of stockbroker, Hill v. Fearis, [1905] 1 Ch. 466). If one partner improperly obtains the benefit of the goodwill, he can be compelled to account for its saleable value (Smith v. Everett, 1860, 27 Beav. 446; 54 E. R. 175; Mellersh v. Keen, 1860, 28 Beav. 453; 54 E. R. 440; Johnson v. Helleley, 1864, 2 De G., J. & S. 446; 46 E. R. 447). In considering the value of the goodwill, the rights of the late partners to carry on business in competition with the purchaser of their business must be borne in mind (see Re David & Matthews, [1899] 1 Ch. 378; ante, p. 447). In a sale under the Court these rights are usually referred to in the particulars of sale (see Trego v. Hunt, [1896] A. C. p. 18).

If a partner holds a valuable appointment (Smith v. Mules, 1851, 9 Hare, 572; 68 E. R. 633) or contract (Ambler v. Bolton, 1872, L. R. 14 Eq. 427) which is not saleable, but the profits of which are to be accounted for by him to the firm, he will be debited with its value. But